U.S. Stocks Reverse Gains as Nvidia and Bitcoin Lead Market Sell-Off

Despite recording impressive Q3 earnings, Nvidia stock failed to keep up a rally as the market grappled with the uncertainty over Fed rate cuts and fears of an AI bubble burst. The crypto market followed suit with the world’s largest cryptocurrency, Bitcoin, plunging to $85k level. 

NVIDIA’s Stocks Fell Despite Stellar Q3 Numbers

The tech giant Nvidia recorded $57.0 billion in revenue in the third quarter. The Q3 numbers are up by 22% from Q2 and increased by 62% from a year ago. The earnings report further notes that data center revenue reached  $51.2 billion, which is an increase of 25% from Q2. Moreover, the 66% from the past year. 

Nvidia delivered strong profitability for the quarter, reporting GAAP and non-GAAP gross margins of 73.4% and 73.6%, respectively, reflecting an efficient cost structure with the $1.30 per-share earnings unaffected by any unusual or one-off items. 

Commenting on the impressive numbers, Jensen Huang, the founder and CEO of Nvidia, said that Blackwell sales were off the charts and that cloud GPUs were sold out. He further stated that compute demand kept accelerating and compounding across training and inference, with each growing exponentially. He mentioned that they had entered the virtuous cycle of AI and the AI ecosystem was scaling fast, with more new foundation model makers, more AI startups, across more industries, and in more countries. He concluded that AI was going everywhere, doing everything, all at once.

The stock surged right after the record earnings announcement, gaining 5% but went down as the fears of the AI bubble burst and uncertainty over the December 10 Fed rate cuts took center stage. With major tech stocks facing the brunt, the S&P 500 crashed by 2.5% within minutes. As of today,  the Nvidia stock is down by 5.88 (3.15%).  The macro pressure and resurfacing of AI bubble burst concerns dragged down the crypto market as well. 

Bitcoin Plunges As the Uncertainties Loom Over December Fed Rate Cuts and AI Bubble Burst, Fear Escalates

The crypto market, which had been under pressure since the record market crash on October 10, saw further price crash with bitcoin plunging to $85,605.74. The price plunge is largely attributed to mounting uncertainty over the Fed’s rate cuts. According to CME FedWatch, the odds of the Fed rate cuts went down to 35% following the release of the September job data. The data released on Thursday, November 20, showed that the U.S. economy added 119,000 jobs in September, showing a small but positive increase in overall employment across most major industries.

The employment data is the first crucial data release since the reopening of the U.S government. The stronger-than-expected data further thinned the Fed rate cut. The stakeholders are now closely watching the inflation data, which would be the most crucial factor determining the stance of the central bank. Along with the macro uncertainties, the fear of an AI bubble burst is also having a spill-over effect on the crypto market.

The growing uncertainties are pushing the investors to adopt de-risking strategies, which is bad news for the high-risk, high-reward crypto market. Reflecting the broader concerns, the Bitcoin market cap went down to $1.7 trillion. The Fear and Greed Index hit extreme fear, with a value of 11. 

As the uncertainties continue, higher volatility is anticipated to remain in the market. 

Nevertheless, the fundamentals remain strong for bitcoin, and a rally may be around the corner if the upcoming inflation data favours Fed rate cuts. 

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